Alvarado CEO accused of illegal deals with doctors

Alvarado Hospital's chief executive has been indicted by a federal grand jury on charges that he illegally paid physicians $10 million to woo patients to the hospital, the U.S. Attorney's office announced yesterday.

Each of the eight counts against Barry Weinbaum, Alvarado's chief executive for 12 years, carries a maximum five-year prison term and a $25,000 fine.

The U.S. Attorney prosecuting the case, Dan Butcher, said Weinbaum's deals were illegal under federal anti-kickback statutes, because "if one hospital is paying a physician for referrals and another is not, then that might affect the physician's judgment as to where to admit a patient."

That, he said, "interferes with the physician's independent medical judgment as to what care is best and appropriate care."

Weinbaum could not be reached for comment.

His attorney, Tom McNamara, said Weinbaum has pleaded not guilty because the money he paid to the doctors "was part of legal relocation agreements that are used by the vast majority of hospitals across the country to bring health care to the community."

"And East County residents are a lot healthier because of it," the attorney said.

Butcher would not comment on whether any other hospital executives or doctors might be indicted, but Alvarado officials said they believed the San Diego hospital might be charged at a later date.

The federal charges are the latest in a series of problems for Tenet Healthcare Corp., the for-profit company that owns Alvarado. The 114-hospital chain has been accused of billing, tax and medical fraud, and last month its chief executive was forced out by investors.

According to the indictment, Weinbaum made relocation agreements with four physicians who were recruited into the practice of a La Mesa internist, Dr. Paul Ver Hoeve.

The indictment says at least $600,000 of the money Alvarado paid to these physicians was knowingly passed through as a kickback to Ver Hoeve, who would refer their patients to the hospital.

Weinbaum, the indictment says, also signed a contract in which Alvarado paid Ver Hoeve $3,000 a month for several years.

"At least 80 percent of hospitals in the country engage in relocation agreements," he said. "It is quite literally the only way doctors can be attracted to some communities."

McNamara and Anderson said the indictment was the result of accusations by Ver Hoeve, who once had a large Medicare practice and pleaded guilty two years ago to charges of overbilling the federal program.

According to the California Medical Board, Ver Hoeve's license to practice medicine was suspended for 90 days, starting in January, on charges of Medicare fraud amounting to $50,000, which he was ordered to repay.

"Our understanding is that a convicted felon, Paul Ver Hoeve, made an allegation that there was a side deal, under which money was given to him under these relocation agreements," Anderson said. "We have faith in the integrity of Barry Weinbaum; we have no faith in Dr. Ver Hoeve."

Anderson said it is implausible that Ver Hoeve was getting kickbacks because Ver Hoeve referred fewer than 150 patients to Alvarado between 1995 and 1998, when he gave up admittance privileges at the hospital.

Ver Hoeve could not be reached for comment. His attorney, Michael Lipman, confirmed that Ver Hoeve cooperated with federal officials.

Weinbaum, 49, of La Jolla, is on the San Diego State University Dean's Advisory Panel and the Healthcare Association of San Diego and Imperial Counties.

He also directs a hospital that treats about 100,000 patients a year. Alvarado has more than 600 affiliated physicians and has been with Tenet or its predecessor companies for 25 years.

During the past year, Tenet has tried to fight federal allegations and internal concerns over management decisions.

Several days ago, Jeffrey C. Barbakow stepped down as Tenet's chief executive in response to pressure from investors concerned about falling profits.

The company's Redlands hospital is under federal scrutiny regarding allegations that two doctors performed hundreds of unnecessary heart procedures.

The chain has been investigated on allegations of overbilling Medicare for patient care. Earlier this year, the federal government accused Tenet of submitting $323 million in false Medicare claims.

According to the U.S. Attorney's Office, Tenet, then known as National Medical Enterprises, pleaded guilty in 1994 to charges it illegally paid physicians to induce referrals at some of its psychiatric facilities. In paying $375 million to settle the charges, Tenet agreed to a corporate integrity program to prevent future violations.

In December, agents from the U.S. Attorney's Office, the Internal Revenue Service and the Office of Inspector General raided Alvarado and seized 24 boxes containing records dealing with referrals or patient admissions by 10 physicians.

"Paying kickbacks for patient referrals . . . inflates the cost of health care for all of us," said U.S. Attorney Carol Lam. "We will prosecute cases involving illegal kickbacks regardless of how the payments are characterized or disguised."